Question

4. A bottling company uses two inputs to produce bottles soft drink sludge: bottling machines (K) and workers (L). The machine costs $1000 per day (r) to run and the workers are paid $200 per day (w). At the current level of production, the marginal product of the machine is an additional 200 bottles per day (МРк), and the marginal product of labor is 50 bottles per day (MPLL​) a. State the rule for determining the cost- efficient combinations of inputs ( K & L ) to produce soft drinks.

Answer 1

Step-by-step explanation:

The rule for determining the cost-efficient combinations of inputs (K & L) to produce soft drinks is to compare the marginal product of each input (MPK and MPL) with their respective costs (r and w). The cost-efficient combination is achieved when the marginal product per dollar spent on each input is equal. In this case, the cost-efficient combination is achieved when the marginal product per dollar spent on machines (MPK / r) is equal to the marginal product per dollar spent on workers (MPL / w).